Money Talk Daily

We have the Labor Department’s unemployment numbers for June, and employment has dropped more than the government was expecting.  And that’s after trying to juggle through the folks who were hired temporarily for census work and then let go.  Then there were the 625,000 people who were dropped from the labor pool because they supposedly gave up looking for a job.  Because of that, the unemployment rate dropped just slightly.  Confused yet?

Here’s what’s going on.  The private sector is not creating jobs in any way that  indicates an economic recovery is underway.  And, as I pointed out in a post some months ago, figuring unemployment is a tricky job, and one that offers enormous opportunities to both  make errors and to deliberately distort the figures for political and other purposes.

Take for example the part of  the report that stated that 625,000 people gave up looking for a job.  Let’s suppose that number is accurate.  Since they are no longer looking for a job, they are not considered unemployed anymore.  That reduces the size of the labor pool which works to reduce the unemployment rate.  So having over a half a million folks give up looking for jobs makes the unemployment rate look better.  Suppose those half a million folks had found jobs instead of giving up.  They would no longer be considered unemployed.  So regardless of whether people get discouraged and give up looking for jobs or whether they actually find jobs, are we to understand that either event has basically the same effect on the unemployment rate?  Does that make sense?  Do you really want to base decisions on data like that?

This economy is far from out of the woods, and it won’t be until there is robust and sustainable growth in the private sector.  When that happens we’ll see a real drop in the unemployment rate, not one spuriously induced by questionable statistical methods.

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